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Financial Freedom Blog

  • How Well Do You Manage Your Credit Score?

    According to a recent study by creditcards.com, Atlanta ranks as the 5th worst city in the country when it comes to managing its money. The research, which looked at credit score by city adjusted for a few variables, found that the average credit score in Atlanta was only 652 as compared with a 664 in Los Angeles for instance. When it comes to the rankings, Atlanta only bested Miami, Tampa, Washington, D.C, and Baltimore.

    Credit Card Debt

    As we have written before, working to improve your credit score has direct impact on your cost of credit and your ability to borrow. One way many customers work to improve their credit score is through a debt consolidation loan – paying off credit card debt and reducing their credit card utilization rates. Other basic steps include making sure you pay your bills on time, not requesting credit too often, and increasing the amount of your available credit lines.

    If you are in the market for a debt consolidation loan as part of your strategy to improve your credit, you want to make sure you are borrowing from a lender that reports credit and that has a good reputation. Also, you want to make sure you can afford the scheduled monthly payments so that you can make your payments timely – failing to make your payment timely will put you right back in the situation of hurting your credit score!

    So, ask yourself, are you doing all you can to better manage your money? What steps are you taking to improve your credit score?

    Patriot Finance makes debt consolidation loans to customers who might have faced some credit challenges in the past. Patriot’s loans are all installment loans with fixed monthly payments for a fixed term – this means you can budget your payment and know how much you owe before you borrow. If are you interested in more, click here for information on our debt consolidation loans.

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  • Credit Cards vs. Personal Loans: Which Is Best for a Major Expense?

    At some point in their lives, most people will find themselves in a situation where they need to pay for a large purchase, but lack the funds to cover it.  Paying for these expenses in cash may be the best financial decision — but it isn’t always realistic. Whether it be for a home repair, medical bills, starting a small business or a new computer, there are times when you simply do not have the money to pay for major expenditures. In these situations, is it better to use a credit card or a personal loan?

    What is a personal loan?

    A personal loan is a loan that you can use for just about anything, from a vacation to medical expenses to debt consolidation.  When you take out a personal loan, you receive the full amount of the loan.  You then make fixed monthly payments for the time period specified in the loan, usually from two to five years. Most personal loans have fixed interest rates, and there usually is not a penalty for paying off the loan early.  For secured loans (i.e., loans where you put up collateral, like a car), interest rates may even be lower than credit card rates. Unsecured loans will typically have a higher interest rate, but these rates may still be lower than those offered by credit card companies.

    When should you use a personal loan instead of a credit card?

    When deciding whether you should use a personal loan or a credit card for a major expense, the answer lies in the details: how big the purchase is, how long it will take you to pay off the amount, and the interest rates and fees charged by the lender or credit card company.

    Many credit cards offer attractive zero percent interest rates, but only for an introductory period (often 12 to 15 months).  If you are making a smaller purchase that you can pay off within this time frame, then taking advantage of one of these offers may be the best choice for you.  For example, if you have to buy a new washer and dryer for a total cost of $1,000, and can pay that amount off in under a year, then opening a new credit card with a zero percent interest rate is likely the smart choice.

    However, if you need access to a larger amount of money and will need more time to repay it, then a personal loan may be the smartest option. The interest rate for a personal loan will likely be lower than a long-term credit card interest rate, particularly if the loan is secured.  Over time, a personal loan with a low interest rate will likely cost you less and be the better financial choice.  Remember to carefully review loan terms, including any origination fees (a one-time fee based a percentage of the total loan amount), before choosing a lender. If possible, go with a highly rated finance company.

    Another major consideration is how much you can afford in terms of your monthly payment. Most people don’t realize that only paying the minimum monthly payment on your credit card could cause you to take up to ten years to repay the balance in full!

    When faced with a major expenditure and a cash shortfall, think carefully about the best option. Credit cards are better for short-term debt that can be paid off relatively quickly, while personal loans are better for larger amounts that need to be paid off over a longer period of time.

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  • Payday Loans vs. Personal Loans: What You Need to Know

    If you’re short on funds, you may be considering a payday loan.  These loans offer fast cash, often with no credit history check.  But with high fees, payday loans can be more costly in the long run.  In many cases, a personal loan is a far better option for most borrowers.

    How Payday Loans Work

    A payday loan works like an advance on your next paycheck.  In order to get one, you must be at least 18 years old and have both a bank account and a job with a steady income.  Most payday lenders do not check your credit history, and instead charge high fees for each $100 borrowed, ranging from $10 to $30.  On a $500 payday loan, fees would likely range from $50 to $150.  Once approved, the lender will ask for a postdated check for the amount of the loan and fees, which will be deposited once you receive your next paycheck.  If you do not pay off the loan completely, additional fees and finance charges will apply.

    While payday loans are convenient, and offer fast cash to consumers, they are a very expensive way to borrow money. According to the Federal Trade Commission, the annual percentage rate charged by these loans can be as high as 390%.  The high fees charged by payday loan lenders also increase the likelihood of a borrower falling further into debt, as their next paycheck is eaten up by repaying the loan and fees and they find themselves short on cash once again.  Consumers often renew payday loans so many times that they end up owing far more in fees than what they originally borrowed. Because of this, many states prohibit payday loans through outright bans or with laws capping fees for small loans.

    How Personal Loans Work

    In contrast, personal loans typically have a lower, fixed interest rate and a defined repayment term of anywhere from two to five years.  Lenders check your credit history, and approve your loan based on your credit report, income and other factors such as whether you have collateral for a secured loan.  Personal loans can also be taken out for much greater amounts than payday loans. This means that personal loans can actually offer a better solution to many immediate financial problems, like paying off overdue bills in full. Because borrowers repay the loan with a fixed monthly payment over a longer period of time, the likelihood of falling into the debt cycle is much lower than with payday loans.

    Given the astronomical interest rates and fees, you should avoid payday loans unless they are absolutely necessary.  Instead, consider a personal loan, which offers substantially lower interest rates and a fixed repayment term.  Personal loans can help get your finances on track, rather than sinking you further into debt.  Apply online today, and find out if you qualify for a personal loan from Patriot Finance.

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  • Doing the Math: Why Debt Consolidation Loans May Work for You

    Now more than ever before, Americans are in debt. Nearly 40% of U.S. households have balances on their credit card, with an average debt of $5,700. Paying off your credit cards is the first step in a healthy financial future. If you are looking to take control of your finances, consider a debt consolidation loan as a way to eliminate credit card debt and establish healthy financial habits.

    With a debt consolidation loan, you can pay off all of your debts with a single personal loan. This could include medical bills, balances on credit cards and more. Loan interest rates are determined by your credit history and whether the loan is secured or unsecured, and are usually fixed for the life of the loan. If you are approved for a debt consolidation loan, you’ll make fixed monthly payments for the loan term (usually two to five years). Making a single payment each month may be particularly helpful for anyone who has a hard time keeping up with multiple payments on different debts.

    When deciding whether a debt consolidation loan is right for you, it’s critical that you take the time to do the math. Credit cards tend to charge high interest rates, with compounding interest. This means that the interest charges are added to the principal and any accrued interest, and that you’ll ultimately be paying interest on top of interest. For example, if you have a $100 balance on a credit card with a 10% monthly interest rate, you will be charged $10 in interest for the first month. If you don’t pay off the new $110 balance, you will be charged $11 the next month, bringing the total balance to $121. Without charging a dime over the original $100, your debt would continue to grow. Most credit card companies compound interest on a daily basis — meaning that each day that you have a balance, you are being charged interest. This makes it particularly difficult to pay off your credit card balances. Compounding the problems with compounding interest, by making minimum monthly payments on a credit card, it can take you years to finally pay off your debt. Using Credit Karma’s Debt Repayment Calculator, you can calculate exactly how long it will take you to pay off that debt – don’t be shocked if you are going to be paying for more than a decade!

    In contrast, most debt consolidation loans use a simple interest formula, which means that interest is charged only on the amount borrowed. These loans are also typically for a fixed term and have a fixed monthly payment. A debt consolidation loan with a lower, simple interest rate will likely result in significant savings — and will help you get back on track financially. Be sure to review the terms of the loan to ensure that the interest is simple, the rate is fixed, and that any origination fee charged will not be too costly. With a fixed interest rate, a simple interest calculation, and a fixed term, debt consolidation loans can save you money — and help you on your way to a healthier financial future!

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  • Is it Harder to Get Credit Now Than a Year Ago?

    According to the latest consumer expectations survey from the New York Federal Reserve, consumers are more pessimistic about their perceived ability to get credit than a year ago. That is, when asked if trying to obtain credit was “much easier, somewhat easier, equally easy/hard, somewhat harder” or “much harder” than it was a year ago, a higher number of consumers felt it would be harder. More importantly, a higher percentage of consumers also felt it would be harder to get credit a year from now.

    While this is an indication of perceived difficulty in obtaining credit and not a survey of actual difficulty in obtaining credit, it is an indicator that consumers are feeling like the fast times of easy credit availability may be coming to and end. Consumer expectations are often a leading indicator of how the markets are moving as the consumer on the street can feel slight changes to economic conditions before reports begin to reflect those changes.

    Interestingly, the report gathers information for five specific credit products: auto loans, credit cards, credit card limit increases, mortgages, and mortgage refinancing. Each of the products has slightly different outcomes in terms of consumer expectation, but overall, there is a sense that credit availability is going down.

    So, what does this mean for you, the average consumer? It may be time to examine your credit needs and determine if you should finally get that debt consolidation loan for instance. Or, if you feel like you might be able to obtain a better mortgage rate, maybe now is the time. But, as always, it is your job as a consumer to examine your own financial situation and make the right decision for your budget and needs.

    We are committed to writing financial literacy information for our customers and those interested in our personal loan products. If you find this information helpful, please share with your friends or family members.

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